A sharp slide in the price of oil propelled the Dow Jones industrial average up more than 300 points Friday as investors bet receding energy costs could stave off inflation and prop up consumer spending.
The Dow’s big gain more than wiped out a loss from the previous session, and all the major indexes had their best weekly gains since April.
A monthlong sell-off in commodities intensified in the wake of recent signs that once-vibrant economies in Europe and Asia are softening. Prices for wheat, soybeans and copper extended their descents.
The reversal in oil over the last four weeks raises hope that shoppers will plow their savings at the gas pump into clothes, restaurant meals and other discretionary spending. Consumer-related stocks surged 5.2 percent, led by retailers such as Coach Inc. and Macy’s Inc.
“This is a good turn across the board,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “This move reflects a real change of opinion, a real change in the outlook for the U.S. economy, for crude and for gasoline at the pump. As confidence follows these indicators, then we’ll see better consumer spending and eventually we’ll see more jobs.”
The Dow bounded 302.89, or 2.7 percent, to 11,734.32. That was the blue-chip indicator’s second 300-point rally in four days, which helped the Dow finish 3.6 percent higher for the week. The Standard & Poor’s 500 index advanced 30.25 points, or 2.4 percent, to 1296.32. It gained 2.9 percent for the week.
The Nasdaq composite index tacked on 58.37 points, or 2.5 percent, to 2414.10, completing a 4.5 percent weekly jump.
Oil tumbled $4.82, to $115.20 a barrel. Crude has slumped more than $30 since its July 3 peak above $145.
In a sign of how sentiment has shifted, oil prices fell despite concerns over potential supply interruptions from a sabotaged pipeline in Turkey and military conflict between Russia and Georgia.
Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis, said that while the strength in the dollar and the resulting drop in oil were attracting buyers Friday, Wall Street’s recent back-and-forth trading illustrates investors’ great anxiety.
“We live in a market where people react, they don’t anticipate,” he said. “So you’ve got this market that’s kind on a seesaw every day reacting to news.”
Bonds ticked lower as stocks jumped, easing demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, was unchanged at 3.93 percent.
Strength of the dollar
The dollar’s rise against the euro came after the European Central Bank and the Bank of England separately left their benchmark interest rates unchanged Thursday. With the European Central Bank signaling more rate hikes aren’t likely, the euro wasn’t as attractive as an investment option.
Kelli Hill, a portfolio manager at Ashfield Capital Partners in San Francisco, said a more robust dollar not only makes commodities like oil less expensive but can also offer a much-needed dose of faith in the U.S. markets and economy.
“People want to sell on anything or buy on anything,” she said, noting that light trading volume can exacerbate the market’s gyrations. “Strengthening in the dollar is a good thing not only for business but also to build back confidence both domestically and internationally.”
She is optimistic the markets will recover and said the rebound could come swiftly once the money sitting on the sidelines gets a sense that the economy is poised to turn higher.
